Philips shares rise on Street-topping Q2

Royal Philips (NYSE:PHG) reported profits of $431 million, or 46¢ per share, on sales of $5.9 billion for the 3 months ended June 30. That amounts to a 57.3% bottom-line gain even as sales shrunk 1.9% compared to the same period in 2015. Earnings per share grew a hefty 53.3% from 2015.

The company’s personal health biz saw sales growth of 4%, down from the 17% nominal sales growth it reported during the same quarter last year. Sales shrunk by 3% for Philips diagnosis & treatment businesses while its connected care and health informatics biz reported a 2% uptick for the quarter.

The company topped Wall Street analysts EBITA forecasts of $586 million, bringing in $597 million for the quarter.

“Philips’ performance in the second quarter of 2016 was solid, with 3% comparable sales growth overall and strong 5% growth from our HealthTech businesses. Our Accelerate! transformation program delivered further operational improvements across most businesses, while we continued to invest in quality and innovation. I am pleased with the successful listing of Philips Lighting on Euronext in Amsterdam at the end of May. With that momentous step, Philips will now fully focus on capturing the exciting opportunities in the health technology space, allowing Philips Lighting to do the same in the growing market for energy-efficient lighting. Philips currently retains a majority holding in Philips Lighting with the aim of fully selling down over the next several years. Our outlook for 2016 remains unchanged, as we continue to expect earnings improvements in the second half of the year, but we are concerned about increased risk due to volatility in a number of markets,” CEO Frans van Houten said in prepared remarks.

Philips, which is targeting a margin of 11% for the full year, has said margin improvements will be “backloaded” toward the second half of the year.

In the personal care business, which contributes 30% of revenues, new connected devices were establishing closer relationships between Philips and customers, he said, citing an oxygen mask for patients with sleep problems that allowed Philips to offer them coaching through cloud computing.

“Our HealthTech portfolio grew 5%, driven by businesses in Personal Health and Connected Care & Health Informatics. We were able to drive further operational improvements while keeping up our significant investments in quality and innovation, including in health informatics, wearable patient monitoring solutions and digital pathology. Equipment-order intake remained uneven and fell by 1% on a currency-comparable basis in the quarter. However, we expect good order intake growth in the second half of the year,” van Houten said in a press release.

Volcano, a catheter company Philips acquired last year, was showing double digit growth, van Houten said, partly as a result of combining the 2 companies’ different sales channels.

He said Philips was committed to Britain, where it has a factory and is also conducting clinical trials and research and development activities, despite the country’s vote last month to leave the European Union.

“We are all a bit concerned about what Brexit will involve,” van Houten said, listing presidential elections in the U.S. and the global security situation as other risk factors.

Shares in Philips have risen 1.9% to trade at $26.60 as of 10:54 a.m. EDT.

Material from Reuters was used in this report.

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